{"title":"Venture capital directors and corporate debt structure: An empirical analysis of newly listed companies","authors":"Viet Anh Dang , Ahmet Karpuz , Abdul Mohamed","doi":"10.1016/j.jbankfin.2023.107031","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate how venture capitalists (VCs) serving as directors on corporate boards affect portfolio companies’ debt structure after initial public offerings (IPOs). Using hand-collected data, we find that companies with a higher fraction of VC directors on their boards use significantly fewer types of debt. The impact of VC directorships on debt concentration is more pronounced in companies facing greater expected bankruptcy costs or higher degrees of uncertainty. We further explore the benefits of debt concentration and find that a highly concentrated debt structure is associated with better corporate performance in companies with VC directors. Taken together, our evidence suggests that VC directors influence newly listed companies to adopt a concentrated debt structure, thus minimizing the risk of distress and enhancing company value. Our results are robust to accounting for endogeneity and sample selection bias.</p></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"157 ","pages":"Article 107031"},"PeriodicalIF":3.6000,"publicationDate":"2023-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Banking & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0378426623002224","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate how venture capitalists (VCs) serving as directors on corporate boards affect portfolio companies’ debt structure after initial public offerings (IPOs). Using hand-collected data, we find that companies with a higher fraction of VC directors on their boards use significantly fewer types of debt. The impact of VC directorships on debt concentration is more pronounced in companies facing greater expected bankruptcy costs or higher degrees of uncertainty. We further explore the benefits of debt concentration and find that a highly concentrated debt structure is associated with better corporate performance in companies with VC directors. Taken together, our evidence suggests that VC directors influence newly listed companies to adopt a concentrated debt structure, thus minimizing the risk of distress and enhancing company value. Our results are robust to accounting for endogeneity and sample selection bias.
期刊介绍:
The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.